Suit Demands $1.6 Million Tax Rebate

July 24, 1986|By RICH POLLACK, Staff Writer

William Norris believes the Internal Revenue Service made a mistake. A $1.6 million mistake.

And he is asking a federal judge to help correct the error.

In a suit filed in U.S. District Court in West Palm Beach on Wednesday, Norris contends that the government overcharged the estate of Laura L. Norris, an estate for which he is the personal representative. Laura Norris, according to the suit, was a Palm Beach resident who died in 1981.

William Norris, in the suit, contends that the Internal Revenue Service was wrong when it taxed the estate for $2.8 million worth of project notes.

``The project notes were obligations issued by `public housing agencies` in connection with low-income housing projects persuant to the Housing and Community Development Act of 1974,`` Norris` attorneys contend in the suit. ``At the time of death, the project notes were exempt from estate tax and were not includable in the decedent`s gross estate.``

Norris asked the government to refund the $1.6 million he contends is owed to the estate, but Uncle Sam has balked at the notion.

In October, the Internal Revenue Service`s Florida District director, Merlin Heye, responded to Norris` request with a letter in which the government said the project notes are not tax exempt.

``The provisions of U.S. Housing Act of 1937 do not preclude inclusion of public housing agency notes in the gross estate of the deceased owner,`` the letter stated.

In the letter, Heye told Norris that if he disagreed with the IRS determination, he could file suit.

``That`s a standard letter that is sent out after we make a determination that tax is due,`` said IRS spokesman Holger Euringer. ``We`re telling them what their options are.``

Euringer said Norris` request is not that unusual.

``There have been bigger amounts than that,`` he said.

Euringer said the case will be turned over to IRS attorneys who will begin investigating.

He said he doubts the agency will change its stance.

``The government has made it pretty clear what its position is,`` he said.